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The Impact of Legislative Reforms to Canadian Federalism on ’s Ability to Reduce Poverty

By Jake Schabas

Abstract

In the past decade, the Canadian city of Toronto has undergone radical internal shifts in its socioeconomic geography and governance structure while simultaneously emerging on the world stage as an extremely livable and financially successful city. These trends have been accompanied by growing poverty concentrated in the inner suburbs at the municipality’s boundaries. In 2006, the provincial government passed the Stronger City of Toronto for a Strong Act explicitly recognizing Toronto as a mature order of government requiring commensurate responsibilities and fiscal authority. This paper critically examines the impact of this act on municipal efforts to reduce inner suburban poverty in the wake of the Toronto’s new place in Canadian federalism.

Keywords: COTA, Canadian federalism, Toronto Tower Renewal, Transit City

Introduction

In the past decade, the Canadian city of Toronto has undergone radical internal shifts in its socioeconomic geography and governance structure at the same time that it emerged on the world stage as an extremely livable and financially successful city. Toronto is North America’s fifth largest ‘megacity,’ it ranks twelfth on the Global Financial Centres Index, and it is consistently recognized as one of the world’s most livable cities by The Economist magazine (Financial Centre Futures 2010). However, despite this rising international profile, poverty rates in Toronto are growing rapidly, particularly in areas near the City’s1 boundaries known as the ‘inner suburbs.’ Recognition that the existing Canadian federalist system does not provide the City of Toronto with adequate legislative power to address this new spatial arrangement of poverty is likewise building. In 2006, the Province passed the Stronger City of Toronto for a Stronger Ontario Act (COTA), a deliberate attempt to strengthen the authority of Toronto’s municipal government. This paper will explore to

1. The capitalized ‘City’ here refers to Toronto as a municipality, whereas ‘city’ refers to an urban form. The Impact of Legislative Reforms to Canadian Federalism 15 what extent these changes affected the City of Toronto’s ability to carry out policies addressing inner suburban poverty through an analysis of two City programs: Mayor David Miller’s Tower Renewal and Transit City. The paper will go on to argue that despite their stated intentions, these reforms do not go far enough in providing the City with sufficient legal and fiscal autonomy to alleviate inner suburban poverty.

History and Context

Canadian cities, like their counterparts in the United States, have historically had little formal legal standing. The 1867 British North America Act that established the operation and structure of Canadian federalism defined municipalities as creatures of the Province (Cote 2009). The 2005 COTA challenged this configuration by creating “a framework of broad powers for the City which balances the interests of the Province and the City and which recognizes that the City must be able to do the following things in order to provide good government…” (Government of Ontario 2005). The Act adopted a “permissive” rather than “prescriptive” powers approach, meaning that the City of Toronto can pass by-laws on issues not specifically prohibited by the Province (Cote 2009). This provided the City with many new powers, such as extending council terms, redistricting, and increasing the Mayor’s power, yet it prohibited creating any major new revenue sources and left social assistance programs and housing a City responsibility (Government of Ontario 2005).

These limitations raise the question of whether COTA provided the City with sufficient powers to significantly improve its ability to reduce poverty in its inner suburbs. Brought to prominence by a 2004 United Way study Poverty by Postal Code: The Geography of Neighborhood Poverty, the authors found that between 1981 and 2001 census tracks defined as ‘poor’ or ‘very poor’ had increased from 16 to 108 in recently amalgamated parts of Toronto at the city’s edge (United Way 2004). These findings presented new challenges for municipal poverty reduction programs, which were predominantly located in the downtown core and far from the isolated inner suburbs. Poverty by Postal Code provoked the City to identify thirteen priority neighborhoods in the inner suburbs to receive increased social services (see attached map [Figure 1] in Appendix). These priority neighborhoods would serve as a framework for two innovative, place- based efforts under Mayor David Miller to use the new powers imparted by COTA to address poverty in Toronto’s inner suburbs.

Mayor’s Tower Renewal

“Toronto is a city of towers,” states the June 1, 2010 Tower Renewal Implementation Draft Book (City of Toronto 2010b). Ostensibly an 16 Berkeley Planning Journal, Volume 24, 2011 environmental initiative to improve the energy efficiency of post-war high-rise residential buildings through retrofits, the Mayor’s Tower Renewal program is a clear example of how the legislative limitations set out in COTA guided municipal policies for tackling poverty issues in Toronto (City of Toronto 2010b). Between 1945 and 1984 there were 1189 multi-unit residential buildings over eight stories tall built in clusters throughout the City of Toronto — the greatest number in North America outside of New York City (City of Toronto 2010a). Originally built to house Toronto’s young professionals, today most of these concrete frame towers are located in the city’s thirteen priority neighborhoods (see map [Figure 2]) and are home to mostly new immigrants and low-income families (City of Toronto 2010a; 2010b). In response to these socio-demographics, Tower Renewal projects included land use reforms to increase retail, social services, and employment opportunities, to spur local economic development, and to encourage walkable, healthy neighborhoods (City of Toronto 2010b).

Complicating matters is that only a third of the targeted towers are publicly owned; approximately 800 towers are controlled by private owners who need convincing to participate in Tower Renewal (City of Toronto 2010b). The City therefore requires large sums of money, approximately $2 billion over 15 years, to make Tower Renewal retrofits possible and attractive to private owners (City of Toronto 2010a). Using the new powers set out in section 148 of COTA, the City plans to establish a Tower Renewal Corporation to finance individual retrofits using bonds, where all projects are grouped together to ensure that all retrofits are funded and that the risk to investors on individual renewal plans is spread among all projects (City of Toronto 2010a). Yet to make the bonds attractive to investors, the City needs to over-collateralize the capital pool by providing a small amount of equity (a maximum of $20 million annually) to give the bondholders extra protection—but that requires provincial approval (City of Toronto 2010a). Provincial approval is also needed to allow the City to give Tower Renewal loans “priority lien” status that would secure them to a building’s property taxes, therefore allowing owners to avoid second mortgages or higher mortgage payments and increasing the project’s appeal to private owners (City of Toronto 2010a).

The creation of a corporation, the disposition of property taxes, and the need for provincial approval all reveal the extent to which COTA has both empowered the City while still failing to give it adequate revenue raising mechanisms. Although COTA gave the City the power to establish a corporation, it withheld authority to approve the fiscal mechanisms that could make Tower Renewal financially viable. These include extending the use of the property tax-based mechanism or providing any financial aid to a corporation by over-collateralizing its credit pool. The use of The Impact of Legislative Reforms to Canadian Federalism 17 property taxes as a mechanism for securing private loan repayments is particularly revealing of the City’s continuing reliance on traditional funding revenues that COTA failed to expand.

Tower Renewal’s need for provincially approved funding mechanisms despite COTA helps explain why the City still finds itself incapable of raising sufficient revenue for programs related to social housing and assistance that had formerly been partly funded by the Province. Ironically, although the City has yet to be granted approval for the new fiscal powers, on December 6, 2010 the Province released a report entitled Tower Neighbourhood Renewal in the Greater Golden Horseshoe, authored by the same architects and planners behind Toronto’s Tower Renewal plan (E.R.A. Architects 2010). It argues for a tower retrofitting program that mirrors Toronto’s Tower Renewal plans but expands to the 1,925 towers across the Toronto region (Kennedy 2010). The lack of authority provided to the City by COTA despite the Province’s apparent interest in Tower Renewal programs highlights the extent to which COTA failed to sufficiently reconfigure Toronto’s subordinated place in Canadian federalism.

Transit City and the Toronto Transit Commission

The funding of Mayor Miller’s Transit City plan, an expansion program seeking to bring higher order public transit options to the inner suburbs, is another example of COTA’s failure to provide the City of Toronto with sufficient legislative authority as articulated in the Act’s text. Until 1998, the Toronto Transit Commission (TTC), Toronto’s public transit system, received 25% of its operating costs and 75% of its capital costs from the Province annually (Horak forthcoming). When the Province withdrew its funding in 1998, the TTC became solely reliant on fare box revenues and already strained municipal property tax revenues, sending its finances into a crisis. However, through a series of intergovernmental agreements spearheaded by Miller, fiscal transfers to the TTC by the provincial and federal government have since increased. This trend peaked in 2007, when the TTC announced that it was pursuing a ten-year multi-billion dollar expansion plan that proposed building over 120 kilometers of throughout the city — one of the largest light rail projects in the world (Horak 2008).

Ostensibly intended to increase general transit service and capacity, the Transit City plan had a profoundly social function: it aimed to bring higher order transit to all thirteen priority neighborhoods in the inner suburbs currently underserved by heavily used bus routes (see Figure 3 in Appendix). With complete decision-making authority of the TTC reaffirmed by COTA, the routes prioritized under Miller increased 18 Berkeley Planning Journal, Volume 24, 2011 accessibility in those areas. Yet with income taxes, gas taxes, and road tolls all requiring explicit provincial consent, Miller had few revenue resources to draw upon for funding. COTA had allowed the possibility of two new highly controversial taxes, a vehicle registration tax and a land-transfer tax, which Miller forcefully passed through Council in 2007 by declaring the City was in a state of fiscal emergency and threatening to close one of the City’s subway lines (Horak 2008). These new taxes were still insufficient to fund Transit City, requiring the City to seek intergovernmental funding. Such funding came in 2009 in the form of $8.15 billion from the Province and $950 million from the federal government, fully covering the cost of the first four ‘priority lines’ without any municipal funds (Horak 2008; Government of Ontario 2009; Toronto Transit Commission 2010). Like the Mayor’s Tower Renewal, Transit City intended to redirect available funds to benefit poverty reduction goals outlined in the priority neighborhoods framework.

Recent events have drastically changed the future of Transit City in Toronto, highlighting both the weaknesses of a funding model so dependent on intergovernmental transfers as well as the vast shortcomings of COTA. On October 25, 2010, Mayor Miller was succeeded by , a vocal opponent of Transit City who on his first day in office announced that “Transit City is over” (Kennedy 2010). Ford has made clear he intends to cancel all current contracts for the 120 km light rail line plan and instead build one 8 km subway in the suburbs using provincial funds (Globe and Mail 2010a). A unique situation has therefore arisen as a result of the new mayor’s stance that tests the governance and funding structures established by COTA.

First, in Toronto’s “Strong Council” model of municipal governance, the mayor does not technically have unilateral authority to decide on TTC matters, and it is unclear whether he has the support of the City Council to cancel Transit City (Cote 2009). At the provincial level, uncertainty as to the Ontario government’s interest in seeing Transit City succeed also directly relates to COTA. Transit City is not only almost entirely funded by the Province, but it is a central part of a long-term regional transportation plan set by the newly established transit agency (Metrolinx 2008). However, to push forward a transit plan in Toronto that is not supported by the City’s mayor, who COTA states is “the representative of the City both within and outside the City” (Government of Ontario 2005), could be interpreted as against the spirit of “mutual respect, consultation and co-operation” articulated in the opening pages of the Act itself (Government of Ontario 2005).

In the case where Council and the Mayor are divided on supporting Transit City, the Province may be in a position to dictate TTC policies despite COTA’s explicit reaffirmation that TTC decisions are a The Impact of Legislative Reforms to Canadian Federalism 19 municipal responsibility. This ambiguity further blurs accountability over Toronto’s transit system, reflecting another failure of COTA. Yet COTA’s greatest shortcoming is ultimately the City’s continuing reliance on intergovernmental transfers for any capital programs, leading to the uncertainty of present plans and keeping the City at the mercy of provincial largesse.

Conclusion

Former Mayor Miller’s Tower Renewal and Transit City programs reflect how the legislative gains made through COTA are insufficient to alleviate inner suburban poverty. The innovative and indirect ways that both Tower Renewal and Transit City attempted to utilize building retrofitting and transit expansion programs to address poverty issues in Toronto are a direct result of the structural limitations that remain in place despite COTA. The continuing need for Provincial approval and intergovernmental transfers even within these strategies further attests to the City’s continuing subordinate place in Canadian federalism. Based on this study of the Tower Renewal and Transit City proposals in Toronto, COTA failed to achieve its stated aim of providing the “fiscal tools to support the activities of the City” in the case of addressing inner suburban poverty. Further legislative authority must be granted to the City by the Province if Toronto’s funding resources are to become commensurate with its governance responsibilities. 20 Berkeley Planning Journal, Volume 24, 2011

References Bird, Richard M. and Enid Slack. 2007. Cities in Canadian Federalism. Policy Options, December 2007-January 2008. http://www.irpp.org/ po/archive/dec07/slack.pdf City of Toronto. Tower Renewal – Financing Options – Report. Prepared by Morrison Park Advisors (May 2010a): 1-38. http://www.toronto. ca/city_manager/tower_renewal.htm City of Toronto. 2010b. Tower Renewal Implementation Book (Draft). http:// www.toronto.ca/city_manager/tower_renewal.htm City of Toronto. 2008. Mayor’s Tower Renewal. Mayor’s Report to Executive Committee. http://www.towerrenewal.ca/news_detail.php?id=7 City of Toronto. 2005. Toronto Strong Neighbourhoods Strategy: Report to Policy and Finance Committee, Sue Cork, Deputy City Manager. http://www.toronto.ca/demographics/sntf/city_sntf_staff_report. pdf Cote, Andre. 2009. The Maturing Metropolis: Governance in Toronto a Decade on from Amalgamation. Institute on Municipal Finance and Governance, University of Toronto. http://www.utoronto.ca/mcis/imfg/resources. htm E.R.A. Architects, planningAlliance, and the Cities Centre at the University of Toronto. 2010. Tower Neighbourhood Renewal in the Greater Golden Horseshoe: An analysis of High-Rise Apartment Tower Neighbourhoods Developed in the Post-War Boom (1945-1981). Ontario Growth Secretariat, Ministry of Infrastructure. Government of Ontario. http://www.cugr.ca/tnrggh Financial Centre Futures. 2010. The Global Financial Centres Index 8. Zyen Group. Qatar Financial Centre. http://www.zyen.com/GFCI/ GFCI%208.pdf Globe & Mail. 2010a. Sheppard East LRT vs Rob Ford’s subway plan. http://www.theglobeandmail.com/news/national/toronto/ sheppard-east-lrt-vs-rob-fords-subway-plan/article1819941/ Lorinc, John and Kelly Grant. 2010b. Councillors Insist They’ll Have Final Say on Transit Plan. Globe & Mail. http://www.theglobeandmail. com/news/national/toronto/councillors-insist-theyll-have-final- say-on-transit-plan/article1821600/ Government of Ontario. 2005. City Bill 53: Strong City of Toronto for a Stronger Ontario Act. http://www.toronto.ca/committees/pdf/ torontoact.pdf Government of Ontario. Province Moving Transit Projects Forward. (1 April 2009). http://news.ontario.ca/mto/en/2009/04/province-moving- transit-projects-forward.html Hirschman, Albert O. 1970. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Harvard University Press, Cambridge Mass. Horak, Martin. Forthcoming. Multilevel Governance in Toronto: Overcoming Coordination Challenges in the ‘Megacity.’ Sites of The Impact of Legislative Reforms to Canadian Federalism 21

Governance: Multilevel Governance and Policy Making in Canada’s Big Cities, edited by Robert Young and Martin Horak. Montreal: McGill-Queens University Press. Horak, Martin. 2010. Understanding Neighbourhood Revitalization in Toronto. Paper presented to “Neighbourhoods” panel at Canadian Political Science Association 2010 annual meeting, Montreal. Horak, Martin. 2008. Governance Reform from Below: Multilevel Politics and the ‘New Deal’ Campaign in Toronto, Canada. Human Settlements Global Dialogue Series, No. 4. United Nations Human Settlements Programme, UN-HABITAT, Nairobi. http://www.unhabitat.org/ pmss/listItemDetails.aspx?publicationID=2494 Inman, Robert P. 2009. Financing City Services. In Making Cities Work: Prospects and Policies for Urban America, edited by Robert P. Inman. Princeton University Press, Princeton. Metrolinx. 2008. : Transforming Transportation in the Greater Toronto and Hamilton Area. Government of Ontario. http://www. metrolinx.com/mx/thebigmove/en/index.aspx Peterson, Paul E. 1995. The Price of Federalism. Brookings Institute Press, Washington D.C. Siegel, David. 2001. Ontario. In Foundations of Governance: Municipal Government in Canada’s Provinces, edited by Andrew Sancton and Robert Young. University of Toronto Press, Toronto. Slack, Enid. 2005. Easing the Fiscal Restrains: New Revenue Tools in the City of Toronto Act. Institute on Municipal Finance and Government, University of Toronto. http://ideas.repec.org/p/ttp/itpwps/0507. html Slack, Enid. 2006. Fiscal Imbalance: The Case for Cities. Paper presented to the Federation of Canadian Municipalities, Toronto. http:// www.utoronto.ca/mcis/imfg/ArticlesPapersPublications/Slack- Fiscal%20Imbalance%20The%20Case%20for%20Cities-2006.pdf Sorensen, Andre. 2010. Tower Renewal and Transit City. Toronto Election 2010 Discussion Paper #9. Cities Centre, University of Toronto. http://www. citiescentre.utoronto.ca/Assets/Cities+Centre+Digital+Assets/ pdfs/publications/Tower+Renewal+and+Transit+City.pdf Toronto Community Housing. 2010. About. http://www.torontohousing. ca/about Kennedy, Brandon. 2010a. Over a Million Living in Highrises Have Been Ignored. . http://www.thestar.com/news/ article/902072--over-a-million-living-in-highrises-have-been- largely-ignored Kalinowski, Tess and David Rider. 2010b. ‘War on the Car Is Over’: Ford Moves Transit Underground. Toronto Star. http://www.thestar. com/news/article/899641--the-war-on-the-car-is-over-ford Toronto Transit Commission. 2010. Transit City Update. https://www3. ttc.ca/About_the_TTC/Commission_reports_and_information/ Commission_meetings/2010/July_14_2010/Supplementary_ Reports/Transit_City_Update.pdf 22 Berkeley Planning Journal, Volume 24, 2011

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Jake Schabas is a Toronto-born urban planning student in his first year at Columbia’s Graduate School of Architecture, Planning and Preservation. He spent his undergrad studying Contemporary Philosophy and English Literature at the University of King’s College in Halifax, Nova Scotia and is now focusing on land use, transportation, and municipal policy issues. The Impact of Legislative Reforms to Canadian Federalism 23

Appendix

Table 1: Distribution of Operating Expenditures, Metro Toronto, 1978 and City of Toronto, 2003 (%)

1978 2003 General government 9.3 6.4 Protection to persons and property 20.0 16.3 Transportation 27.7 20.8 Environmental services 13.4 16.5 Health Services 3.0 4.0 Social services and social housing 12.7 27.4 Recreation and cultural services 12.3 8.0 Planning and Development 1.7 0.7

Total expenditures 100.0 100.0 Source: Ministry of Municipal Affairs and Housing, MARS database

Table 2: Distribution of Operating Revenues, Metro Toronto, 1978 and City of Toronto, 2003 (%)

1978 2003 Property taxes 49.4 40.0 Payments in lieu of taxes 4.5 0.9 User charges 18.0 19.6 Transfers from other governments 22.3 22.0 Other revenue 5.9 17.5

Total revenues 100.0 100.0 Source: Ministry of Municipal Affairs and Housing, MARS database

Table 3: Intergovernmental funding for TTC, 2000–2007 ($ million) 2000 2001 2002 2003 2004 2005 2006 2007 Provincial 0 0 63 141 141 159 271 329 Federal 0 0 62 14 12 163 166 112 Total 0 0 125 155 153 322 437 441

Note: All of the federal funding listed is for capital purposes. Provincial figures include operating subsidies, which started at $70 million in 2003 and increased to about $90 million in 2005 and thereafter. Source: Toronto Transit Commission Annual Reports 2002-2007. 24 Berkeley Planning Journal, Volume 24, 2011

Figure 1: Thirteen Priority Neighborhoods in the City of Toronto

Source: City of Toronto

Figure 2: High-Rise Clusters with Current and Future A

Source: E.R.A. Architects Blog http://era.on.ca/blogs/towerrenewal/) The Impact of Legislative Reforms to Canadian Federalism 25

Figure 3: Planned Transit City Lines and Thirteen Priority Neighborhoods

Source: http://www.savetransitcity.ca/